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Ukrainian emerald cartel

31 march 2014

Several years ago, the agents of the Ukrainian Security Service intercepted a large parcel of smuggled Colombian emeralds at the Borispol Airport in Kiev. The case promised to set off much drumbeat, but it quickly fell apart. There were two reasons for this: the affair involved a senior official of one of the law enforcement agencies in Ukraine, while the emeralds turned out to be ... synthetic. These circumstances could have been an incentive to investigate this case celibre, but the then Ukrainian government was not at all interested to do it. Now some of the persons involved in the case were forced to leave Ukraine due to the well-known political events in the country. One of them agreed to comment the specifics associated with the trade in synthetic gemstones to Rough&Polished. Our meeting took place in Athens in early March of this year.

So, that story at Borispol... What was it? An occasional thing? Or a failure in a well-functioning channel?

It was the war between protection rackets. We worked under the protection of the Main Intelligence Directorate of the Ukrainian Ministry of Defense. And the Security Service of Ukraine got very nervous about it.

The flight was from Holland, so how did it happen that Colombian emeralds had made it to Amsterdam?

It was a small test lot taken for examination to gemological laboratories to get certificates that these emeralds come from Colombian emerald fields.

Did they get such certificates for a bribe?

Why? Everything was clean, the stones were certified as natural, Colombian.

Do you want to say that European gemological labs could not detect synthetics?

Well, yes. It was a regular matter to send about one-tenth of each produced lot to a laboratory, mainly in Belgium and Germany. If the labs there issued certificates for natural “Colombians,” the lot went into business. If they had any doubts, the lot got rejected. It was an independent test. Product quality was up to par.

Did such checks make you probably pay through your nose?

More or less, everything depended on the parcel size; sometimes it took just a few percent from your profit and sometimes one half of it. Generally, the economic side of this business was as follows: we bought rocks at a wholesale price of $4 to $9 per carat and traded them at a sale price of $100 to $3,000 per carat. Sometimes even higher. Much depended on the buyer and much on what emerald field we had to imitate.

In other words, synthetic gems were “trimmed” to specific emerald fields?

Yes, that's right. This business has been made really possible, when it was learned how to imitate stones from specific emerald fields - Columbian, African and Russian, if you like. Specific inclusions inherent to different emerald fields were the main feature for identification – whether it was a natural or artificial emerald. And now we can say this feature just vanished. All the other indicators - refraction, density, fluorescence, etc., everything is exactly like in natural “Colombians.” Plus some mechanical treatment, which makes a gem shaped as if it was recovered "from the mountain." Labs cannot identify them – as far as I remember, there were only two cases, and then only at the start of this business. And people worked “under the Colombian guise” because 90% of emeralds in the market are Colombian.

And how long ago did such revolutionary technologies emerge?

About ten years ago.

And who is the main producer? And the buyer?

Well, let's say the production facility we dealt with is located in the CIS countries. Maybe now China moved in, but I cannot say for sure. The buyers were mostly Indians.

This fraudulent scheme is very internationalized... And did the Colombians take part in it?

What do you consider fraudulent? For a producer of these gems it is a perfectly legitimate and respectable business; they make a parcel of goods and these goods are synthetic by all the pertinent documents. Well, yes, it imitates Colombian emeralds. So what? Maybe it’s a customer’s whim! The producer’s customs service is not interested either, because it is synthetics. And it is not the producer’s headache what happens with this parcel of goods afterwards. Labs receive stones for examination and honestly give a certificate for natural Colombian emeralds. Then the buyer gets the goods, which he is free to submit to certification – the result will be the same. If nobody sees any difference, you can’t call it fraud, by and large. We worked with the Colombians in the beginning. It’s very troublesome and unreliable. And dangerous - by the way, those dealing with emeralds are in incessant clashes between themselves, much more violent compared to the cocaine guys. It turned out easier to establish our own dealers: they used to buy from some “Don Pedro” in Colombia, but you never know how much this “Don” is mining, they have there a complete mess with this.

What is the amount of such “Colombian” emeralds in the market?

It would be difficult for me to speak about the whole market, but I think that such goods account for 70 percent in jewelry pieces carrying emeralds over 2 carats in size. It is a very profitable business - hundreds and even thousands of percent in profits. Those factories that I know have a workload filled to the brim. Emerald production in Colombia is decreasing, but there is no scarcity of these goods in the market. What does this mean? Why are they unable to start mining emeralds in Russia? You know what kind of money you have to invest to make a mine running! Meanwhile, production cost of synthetic gems is $ 2 per carat. If you want a “Russian” emerald, please go and have it, no problem!

Sergey Goryainov, Rough&Polished, Athens